GERMANY'S TRADE SURPLUS AND THE INTRODUCTION OF THE EURO

I have been meaning to repost this from the Sudden debt blog by Hellasious.

It's a post that really makes you look at Eurozone crisis in a different light.
Despite all the PIIGS bashing going on, we often forget that German Exports did benefit greatly from the shift to the Euro!

Sudden Debt: One Picture Is Worth A Thousand Marks (or Merkels)...: Given what is going on in the eurozone at the moment, it is worth it to point out that the biggest beneficiary of the euro is Germany itse................

""""""A full 41% of Germany's surplus comes from France, Italy, Spain and (gasp!) Greece, where Germany is still exporting like gangbusters despite the poor country being in its fifth year of recession.  In fact, Germany's trade surplus per person with Greece is 3.6 times bigger than that with the U.S. (290 euro per Greek versus 81 euro per American)."""""""""

EUROPEAN YOUTH UNEMPLOYMENT - A REAL CRISIS.

A really worrying issue that has only started to feature in business news recently, is youth unemployment.

Below is a chart of European youth unemployment by Adam English at Inside Investing Daily.

Another Link, this time from the Telegraph:

Youth unemployment passes 50pc in Spain and Greece - Telegraph

CURRENCY VOLATILITY

Well, after trending downwards for weeks, the USD seems to have stabilized for now, and a counter trend rally in the USD is underway.

Here are some charts that tell the whole story. No one seems to want a strong currency!

• The rally in the EUR, JPY and CHF will hurt exporters in Europe, Japan and Switzerland.

• A weak USD meanwhile, will boost US exports.

• The Chinese have thus far resisted any significant appreciation in the Chinese Yuan.

USD CHF : The CHF broke down below parity in its recent rally vs the USD

USD CAD : It came ever so close to testing parity vs the USD

USD JPY : Despite the efforts of the Bank of Japan to weaken the JPY, the JPY continues its relentless upward march.

EUR USD : A weak EUR helped boost Germany's GDP numbers last quarter. the recent rebound in the EUR will surely make life difficult for the Club Med nations

Conclusion:

The USD appears to be oversold in the near term and a counter trend rally is underway. The market is betting on some mega fire power solution from the US Fed at its meeting in November. If QE2 disappoints and the equity markets sell off, the USD could stage a much stronger rally!

The Equity markets have been getting far too complacent about the weak and worrying news data and unemployment numbers in the US.

Fund flows to emerging markets have boosted stock prices across the board and a correction is well overdue. These markets are ''not decoupled from the actions of the US Fed'' and when the tide starts to turn we can expect large fund outflows to have a drastically negative impact on stock prices in emerging economies

Lastly, the rally in Gold prices also appears ripe for correction and consolidation. Silver prices too, are clearly overstretched in the near term. expect lower prices if the USD stages a comback rally. It's not time to be buying the precious metals sector just yet!

Watch this space!

GREECE & the EUROZONE

Here's a fantastic cartoon by John Trever from the Albuquerque Journal.
SOURCE: Image dated : 03/11/10
http://www.cagle.com/working/100311/trever.jpg

GREECE : DEBT, DEFICIT & FITCH DOWNGRADE

Over the last few months, Ireland, Spain, Greece & Dubai have been getting a lot of attention in the financial media.
Issues like unemployment, real estate meltdowns and debt concerns continue to haunt the ''green shoot recovery'' in Europe's weaker economies

Coming to Greece, Fitch Rating cut Greece's rating to BBB+, on lingering worries of an ever expanding deficit of 12.7% of output --- that's way over the EU limit.
Greek Swelling Deficit a Concern for Euro Area, Almunia Says ...
FT.com / Brussels - Brussels to rebuke Greece over budget deficit

Concerns over Greece's $350Bn debt resulted in the Greek/German 10yr yield spread widening to over 200bps
Greek/German 10-yr yld spread widens above 200bps | Reuters


The equity markets in Greece have pulled back sharply as well.
Just goes to show you how quickly these fragile stock markets can give up recent gains!

Clearly, the the aftershocks of the 2008 meltdown and subsequent credit contraction and asset deflation, continues to spit in the face of Wall Street's 'green shoot recovery'.